NC overpaid $178M in unemployment benefits in 12 months

dranii@newsobserver.comMarch 14, 2013 

The state Division of Employment Security paid out an estimated $178 million more in unemployment benefits than it should have for the 12 months that ended in June, according to the U.S. Department of Labor.

North Carolina’s estimated rate of “improper payments” last year – 12.59 percent – actually was only a little more than a percentage point above the national average, the data shows, with 24 states performing worse. But the sheer volume of benefits collected by unemployed Tar Heel workers – a function of the state’s persistently high unemployment date – adds up to big bucks.

The state paid out $1.43 billion in benefits for the 12 months that ended June 30. The improper payments calculated by the Labor Department totaled $179.4 million, but that sum includes $1.5 million in underpayments.

The improper payments for North Carolina and other states are estimates based on extrapolations of random audits of claims. Sample sizes ranged from 360 to 480 claims per state.

“Whether it’s $179 or $179 million, it’s too much,” said Dale Folwell, the new head of the Division of Employment Security. “Any time there is waste, fraud and abuse, the trust people have in the system goes down.”

Thursday was the first official day on the job for Folwell, a Republican and former House Speaker Pro Tem.

“If we’re doing things within the agency that are rewarding people for the wrong behavior, that’s going to stop,” Folwell said. “We want policies in place that reward people for the right behavior and punish people for the wrong behavior.”

Forty-two percent of the improper payments highlighted by the Labor Department were attributed to people continuing to claim and receive benefits after returning to work.

But it would be wrong to assume that means fraud, said John Quinterno of South by North Strategies, a Chapel Hill firm specializing in economic and social policy.

“If you look in the chart, the actual rate that they attribute to fraud is very, very small,” he said. The Labor Department estimates that 3.84 percent of improper payments were the result of fraud.

“There are all sorts of reporting requirements,” Quinterno said. “Sometimes the worker starts a job and doesn’t report the change in status promptly enough. There can be a variety of reasons.”

An additional 36 percent of the improper payments was the result of benefits that were paid to people who were subsequently disqualified from eligibility, which can happen when an employer sends inaccurate or tardy information or a ruling on eligibility is made on appeal.

“That you can say is very much on the employer,” Quinterno said.

Quinterno also noted that the Department of Labor data shows that the state has implemented, or is on track to implement, steps that the federal government has recommended it take to reduce improper payments.

“The state is not sitting idly by,” he said.

The Labor Department estimates that improper payments nationwide totaled $5.16 billion last year.

Indiana had the highest improper payment rate last year: 32.75 percent. Pennsylvania, which had a 23.6 percent improper payment rate, led the nation by paying an estimated $715.5 million more than it should have.

The Labor Department cautions that comparing states’ “accuracy rates” for unemployment benefits may be misleading.

“No two states’ written laws, regulations, and policies specifying eligibility conditions are identical, and differences in these conditions influence the potential for error,” the Labor Department states. “States with stringent or complex provisions tend to have higher improper payment rates than those with simple, more straightforward provisions.”

Although North Carolina’s improper payment rate was significantly better than some states’, it’s been getting worse. The rate was 8.1 percent in 2010, 10.66 percent in 2011 and 12.59 percent in 2012.

A new law signed last month by Gov. Pat McCrory that takes effect July 1 reduces the amount of benefits unemployed workers receive – maximum benefits will be cut by one-third – and reins in the number of weeks they’re eligible to receive them. It also eliminates federal unemployment benefits that currently kick in when state benefits are exhausted.

The primary justification cited for the bill, which was pushed by a coalition of businesses led by the N.C. Chamber and supported by Republican legislators, was to accelerate repayment of $2.6 billion the state borrowed from the federal governments to cover the first 26 weeks of jobless benefits since the recession sent the unemployment rate soaring.

Ranii: 919-829-4877

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